26 diciembre 2014

China’s debt problem: How worrisome and how to deal with it?

  • Autor: Alicia Garcia Herrero and Le Xia
  • Tema: Macroeconomía
  • Tipo de trabajo: Documento de Trabajo
Amb la col·laboració de Caixa d'Enginyers

This paper investigates China’s debt problem in various perspectives. We find that the reason that China has been getting into a debt problem was mainly due to the huge stimulus package and lax monetary policy during the 2008-2009 global financial crisis. We then estimate that China’s total nonfinancial sector debt amounted to 235.1% of GDP, a high level relative to other emerging markets, among which public sector debt was 53.2% of GDP while private sector debt amounted to 181.9% of GDP. The debt problem may exacerbate banks’ asset quality and weigh on growth rate. To solve the debt problem, we propose that the authorities should press ahead with structural reforms and financial liberalization while local governments can privatize their controlled SOE assets to raise funds for debt repayment.

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